Lower Prices Aimed At Selling Cellular

April 7, 1986|By Tom Stieghorst, Business Writer

For $99 dollars a month, you can have your own car telephone. Sound good to you, Verne?

BellSouth Mobility hopes so. In a radio ad campaign launched last week -- azimed at all Vernes and other potential customers -- the Miami-based cellular telephone firm is touting a rent-to-own program as the way to take advantage of new car phone technology. The $99 package covers rental of the phone equipment and the standard $40 service charge, as well as 30 minutes of free calls. Users pay separately for the extra minutes spent on the line. After 36 months, the phone is paid off.

Such packages are one way cellular phones are becoming more affordable as the 4-year-old industry picks up speed.

But while car telephone ownership has gone from 180,000 to 450,000 since cellular systems began operating, it is still beyond the reach of most consumers. The average car phone carries a price of $1,547, according to Solomon Wolff Associates, Inc., a Mountain Lakes, N.J., consulting firm. And cellular service bills average $143 a month, the firm said.

The typical user of car telephones is likely to be a highly paid attorney, doctor or a successful small-business owner. That may be changing soon, however. While phone prices are still high, they`ve dropped significantly over the past couple of years. And service prices are becoming more attractive as competition spreads.

South Florida car phone users should see some price breaks this summer when Cellular One, a BellSouth competitor based in Fort Lauderdale, flips the switch on its long-awaited system.

Since only two companies in any metropolitan area are permitted by the Federal Communications Commission to build a cellular system, BellSouth has had a virtual monopoly since it started service in 1984.

Cellular One began accepting customers last year, but has been serving them through Bell`s system while completing its own network.

``Right now the cellular service in Florida is among the highest in the country,`` said David Pedersen, sales manager for Cellular One. ``When we go on line, it will be an entirely different ball game.``

Competitive pressures are slowly taking shape nationwide. About 70 cities have at least one cellular company in operation, according to a Solomon Wolff study. A handful of cities have two companies on line.

Observers agree that cellular will eventually be more efficient than the old radio telephone system, under which the supply of frequencies was limited and users often waited years to get a phone.

The major difference is computer technology, which allows many users to share the same frequency.

In operation, the cellular system resembles the honeycomb of a beehive, with the hive representing a market area. All radiotelephones send out a signal, which is picked up by an antenna at the cell site and relayed to a central switch, where it enters the regular phone system.

As the caller travels from one cell to the next, a computer switches the call from one antenna to the next. Since 333 channels are available in each cell, the system provides far more capacity than before.

When the cell concept was approved by the FCC, its potential attracted a lot of attention. ``You literally had thousands of small companies jump into this industry thinking they were going to make millions overnight,`` said Doug Solomon, managing director of Solomon Wolff Associates.

The mass market for cellular, however, is developing more slowly than many people had thought, according to Solomon. The thinking that car phones would quickly become a universal item was ``flawed`` in two ways, he said.

First, pricetags on phones have not generally cracked the $1,000 level deemed attractive to non-business users. Although phone costs have declined steadily from their original range of $2,500 to $4,000, they`ve stabilized lately in the $1,200 to $1,700 range.

Local dealers even say the prices of many Japanese phones have started to rise in recent weeks, in response to the appreciation of the yen against the dollar.

In addition, at least five major Japanese firms have been paying duties on cellular phones since last October, the result of an unfair trade case brought by Motorola Inc., the largest U.S. manufacturer.

``A lot of people believe the sucess that Motorola had in suing the Japanese for dumping is going to slow down the price declines considerably,`` Solomon said.

The Japanese companies, including Mitsubishi, NEC and Oki Electronics, have responded with plans to move production into the U.S., to sidestep the duties.

Even if equipment prices fall, however, service costs are likely to remain high. Experts agree this is the more important cost barrier.

``It`s not the cost of the equipment but the cost of using the equipment,`` said Rick Golightly, sales manager for Mobile Telephone Co. of Florida in West Palm Beach.